THE member of Congress who is most responsible for our economic troubles may pay for his sins in November.
Rep. Barney Frank (D., Mass.) is chairman of the House Financial Services Committee. No one insisted more strongly on the lax lending standards at the heart of the subprime mortgage crisis.
And no one fought more vigorously against oversight of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp., Freddie Mac), whose bankruptcies accelerated the economic collapse.
The core of the crisis was that billions of dollars were lent to poor credit risks who couldn't pay it back. When they defaulted, the housing bubble popped, and $6 trillion of wealth disappeared almost overnight.
Companies such as Countrywide Financial could make money making bad loans, because they sold them right away to Fannie Mae and Freddie Mac. In addition to buying billions of dollars worth of bad paper, Fannie and Freddie, as "government-sponsored enterprises," were excused from the reserve requirements imposed upon other banks, so they had less of a cushion to absorb losses. Fannie and Freddie have received taxpayer bailouts of about $150 billion to stay afloat.
In 2003 and 2005, President George W. Bush proposed tighter regulation of Fannie and Freddie. But Democrats, led by Mr. Frank, blocked it.
Having pushed policies that contributed to the housing crisis, Democrats now advocate policies that would make it worse. The latest is a call by some of them for a national moratorium on foreclosures. This would have such a devastating impact on our moribund economy that even President Obama opposes it.
The Obama Administration's interventions in the housing market have cost taxpayers a great deal of money, but haven't helped much because the housing crisis is mostly a crisis about jobs. People who lose their jobs have difficulty making mortgage payments.
For housing to recover, the market must clear. To reduce the excess inventory caused by overbuilding, home prices must fall another 10 to 20 percent, housing experts think.
A foreclosure moratorium would delay market clearing. Dumping all the foreclosed homes at once on the market when the moratorium ends would depress prices further.
Banks don't want to foreclose if they can avoid it. The typical homeowner who is being foreclosed upon has been delinquent for more than a year.
Mr. Frank called for a foreclosure moratorium last year, staying ahead of the crowd in proposing economically harmful measures. But his reign of error may be coming to an end.
Mr. Frank has a reputation for arrogance, a product of representing a safe Democratic district since 1981. But he seemed defensive in a recent radio debate with his Republican challenger, Sean Bielat.
A major in the Marine Corps Reserve who holds two masters degrees and is a former program manager for iRobot Corp., Mr. Bielat is one of the most impressive GOP candidates this year.
A poll taken for Mr. Bielat in late September showed Mr. Frank leading, 48 percent to 38 percent. A 10-point lead might seem like a lot. But a month before the special election in Massachusetts last January, Sen. Scott Brown trailed Democrat Martha Coakley by more than that. Mr. Brown carried Mr. Frank's district.
Mr. Frank remains the favorite. But "it's very nice to see Barney Frank moved from the security of having a seat in the shrinking lifeboat to white knuckles on the gunwale," commented Rick Ballard on the blog "Just One Minute."
Jack Kelly is a columnist for The Blade and the Pittsburgh Post-Gazette.
Contact him at: email@example.com.
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